It has long been known that it is possible to avoid a flat rate income tax on the returns to risk bearing by simply increasing the size of the transaction. The theory is simple. A flat income tax takes an equal share of gains and losses. In doing so, it reduces both the expected return and the variance of the transaction. By increasing the size of the transaction ("grossing up" or "scaling up"), it is generally possible to restore both the pre-tax level of risk and the pretax return from the investment itself. If the risky transaction requires no capital -- such as with many with some derivative contracts -- grossing up is costless and the tax has no effect on the taxpayer. From the government's point of view, the government has essentially engaged in the grossed-up transaction as a partner. The government suffers the risks of its share of the transaction and receive the rewards of its share, no more.

The Colloquium will be held in Room 202 of Vanderbilt Hall from 4:00 - 6:00 p.m. EST. Although the public is invited to attend, due to heightened security throughout NYU Law, please contact Haydee Torres so she can provide the Guard's desk with your name.